Correlation Between Citic Guoan and Anhui Gujing

Can any of the company-specific risk be diversified away by investing in both Citic Guoan and Anhui Gujing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citic Guoan and Anhui Gujing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citic Guoan Wine and Anhui Gujing Distillery, you can compare the effects of market volatilities on Citic Guoan and Anhui Gujing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citic Guoan with a short position of Anhui Gujing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Guoan and Anhui Gujing.

Diversification Opportunities for Citic Guoan and Anhui Gujing

0.58

Correlation Coefficient

Citic Guoan  Anhui Gujing

Very weak diversification

The 3 months correlation between Citic and Anhui is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery and Citic Guoan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citic Guoan Wine are associated (or correlated) with Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of Citic Guoan i.e., Citic Guoan and Anhui Gujing go up and down completely randomly.

Pair Corralation between Citic Guoan and Anhui Gujing

Assuming the 90 days trading horizon Citic Guoan Wine is expected to generate 1.19 times more return on investment than Anhui Gujing. However, Citic Guoan is 1.19 times more volatile than Anhui Gujing Distillery. It trades about 0.06 of its potential returns per unit of risk. Anhui Gujing Distillery is currently generating about 0.03 per unit of risk. If you would invest  526.00  in Citic Guoan Wine on December 29, 2024 and sell it today you would earn a total of  36.00  from holding Citic Guoan Wine or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citic Guoan Wine  vs.  Anhui Gujing Distillery

Citic Guoan Wine

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Anhui Gujing Distillery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Gujing Distillery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Gujing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citic Guoan and Anhui Gujing

The main advantage of trading using opposite Citic Guoan and Anhui Gujing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Guoan position performs unexpectedly, Anhui Gujing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Anhui Gujing will offset losses from the drop in Anhui Gujing's long position.

The idea behind Citic Guoan Wine and Anhui Gujing Distillery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.